What is a telematics (black box) car insurance?http://moneysupermarket-3.wistia.com/medias/b706a1i2p2?embedType=async&videoFoam=true&videoWidth=640 Telematics insurance is a type of car insurance which sees a telematics box (also known as a black box) fitted to your car to relay back to your insurer information on how, when and where you drive to build up a picture of your driving style. If your driving meets or exceeds the standards set by your insurer, you should see a drop in the cost of cover. If it drops below what is expected you'll see your insurance costs increase. Some polices reward safe driving within a couple of months, meaning policyholders don’t have to wait for the annual no claims discount to be applied. Telematics car insurance is also known as 'pay-as-you-go' or 'pay-as-you-drive' car insurance because the price you pay for cover is determined by how, when and where you drive.
How can a telematics black box cut the cost of car insurance?Once fitted to your car, the telematics black box will record things like speed and braking patterns and distance travelled, as well as the types of roads you are using and when. This means that instead of just working on a set of assumptions based upon your application, the insurer can build up a clear picture of how and when you drive and adjust the price of your annual policy accordingly. If you're considered a safe driver and don't spend too much time on the road, particularly at night and on busy carriageways, this can cut the cost of cover, and that's why telematics policies are particularly popular with young drivers keen to prove they're not the irresponsible road-users insurers think they are. So why aren't responsible drivers from all age groups taking on telematics? One reason is that once you have a certain number of years' worth of claim-free driving under your belt the assumption is you're a safe driver and your accumulated no claims bonus can bag you a discount of up to 65%. Another reason is that telematics policies often impose a cap on the number of miles you drive each year, if you exceed it then you have to pay extra on top of the price of your annual premium. These annual mileage limits are set at around 5,000 miles, which is well below the 7,500 miles the average UK motorist covers each year. http://moneysupermarket-3.wistia.com/medias/j4axsbaz1c?embedType=async&videoFoam=true&videoWidth=640
Putting telematics to the testAnd so as a far-from-young commuter who covers at least 12,000 miles a year, I decided to put the telematics black box to the test. Here's what I found...
Getting the telematics black box installedCarrot Insurance agreed to fit my car with a telematics black box for the purposes of the test and sent out an engineer to install the device – the whole process took around 20 minutes during which time the engineer gave the car the once-over to check that things like lights and indicators were working properly and logged anything that wasn’t (as it happened I had a brake light out, which I subsequently got replaced). From that moment on every second I was at the wheel was logged and my driving style assessed, from early morning school runs to late night petrol runs and everything in between. Under Carrot’s system, drivers are scored between 10.0 (good) and -10.0 (bad) in three key areas: smoothness, which means no harsh braking or accelerating; usage, which means trying to avoid night driving and excessively long or short journeys; and speed, which obviously means no speeding.
Anyone who scores highly will be shown what discount they can expect at renewal and Carrot also offers a quarterly cash back payment that is put onto the prepaid card issued when the policy is taken out. So how did I get on in my first week? Not very well at all, as it happens…
Telematics - week 1
I covered 148 miles in the first week of my trial and found, just as when I failed my driving test earlier in the year, that speed was a problem. I scored a pretty impressive +7.0 on smoothness and a perfect +10.0 on usage, but my speed was an eye-popping -10.0 – on that evidence not only would I have to do without my cashback reward, I’d also be looking at a 2% increase at renewal, not to mention the possibility of a speeding fine. So clearly I had to keep my speed in check, paying particular attention to motorway driving where it can be all too easy to inadvertently go beyond the 70mph mark. Another area of concern was that it was also looking like I’d be going beyond my allotted 5,000 annual miles by some 4,500 – although given my xx-mile daily commute this was something that would be harder to put right.
Telematics - week two
At the end of week two I had covered a total of 433 miles and was now looking at being 3,500 miles over my 5,000 mile limit. And while I could purchase top up miles I first had to get my driver score up as the better your score, the less you pay for additional miles. For instance, a driver with a score of -10.0 will pay £18.30 for 1,000 additional miles, while someone with a score of +10.0 will pay just £9.20. And it seems a week of dial-watching did the trick as, although still not perfect, my speed was much improved at -3.0, as was my smoothness at +8.0, but my usage had suffered a little, clocking in at +9.6 thanks to a couple of late night pub pick-ups and petrol station runs. This meant I was now looking at a 9% discount on renewal and £32 on my Carrot card at quarter end - I just had to keep it up now.
Telematics - week three
By the time week three had come to an end, I’d driven 775 miles, which meant I was looking at almost doubling my allotted mileage for the year - some additional miles would definitely be needed - so how was my score looking? A lot better, as it happened. I’d managed to get my speed into the green zone at +1.0, and my usage had improved again as it was back up to +9.0. However, for some reason my smoothness had suffered, dropping to +7.0, so this was something I’d have to watch along with keeping an eye on my speed. This meant that in the space of just three weeks I had managed to get my score to a point whereby I could net myself a 14% discount on renewal and would see a cool £56 making way into my pocket at the end of the quarter. Not only that, but it had made me a lot more aware of my driving style, paying particular attention to my speed, and it could be argued it actually made me a better driver - if any aspect of my driving was deteriorating this would be reflected in my score and I could immediately take steps to put it right. What I still didn’t know though, was whether telematics would prove to be a cost effective alternative to my standard insurance.
Is telematics for everyone?
In order to gauge the cost-effectiveness of taking out a telematics policy I used MoneySuperMarket to run a standard quote and then got a quote from Carrot based upon the same details – and telematics proved to be a lot more expensive, weighing in with an annual premium of £1,439.17 compared with the £442.75 I was quoted with MoneySuperMarket. Furthermore, as the telematics policy only quoted me for 5,000 miles per year. The additional 7,000 miles would cost me somewhere in the region of £84 based on my current driver score of +3.0. The reason my quote came out so high is largely because the telematics market is not yet geared towards drivers in my demographic, as Ed Rochfort, product director at Carrot Insurance, explains: “In the main, telematics policies are aimed at new and young drivers, or those with previous accidents or convictions, and anyone paying over £800 per year should find telematics offers competitively priced premiums. “But the technology is not only designed to offer drivers a good deal on their car insurance, it’s aimed at getting drivers to think about their performance behind the wheel, become more considerate and careful drivers and, by extension, reduce the number of road accidents involving those is ‘higher-risk’ groups.” “And the increased use of app-based and ‘plug-and-play’ technology means the industry could be looking to move into the mid-market group, those paying between £400 and £800 per year, as early as next year.” So although the price wasn’t competitive enough to make me consider a telematics policy this time around, the major benefit for me was that having the black box installed and being able to monitor my own driver behaviour made me a more considerate and, dare I say, better driver. As and when telematics becomes the norm, it looks like it’s something that will benefit all motorists.
Originally published Thursday, November 21, 2013